Contents

Piercing the veil

Nevada law provides extremely strong protection against
piercing the corporate veil, where a corporation's owners can be held responsible for the actions of a corporation. For instance, from 1987 to 2007, there was only one case that successfully pierced the corporate veil of a Nevada corporation, and in this case the veil was pierced due to fraud on the part of the corporation's owners.[citation needed]

Because the provisions on "piercing the corporate veil" are corporate governance matters, if a corporation chartered in California, for example, (which has much more creditor friendly provisions permitting this) is sued anywhere, California law applies, but if a corporation chartered in Nevada, which operates only in California, is sued in a California court, the California court would use Nevada law in determining what are the requirements permitting this. (Note that foreign corporations, including those, for example, incorporated in Nevada, may be subject to California Corporation Code 2115.) On the issue of "piercing the corporate veil," Nevada law applies (which is much more supportive of the corporation's interest), even if the corporation only operates in California and has never had any other contact with Nevada and is simply chartered there as a "
flag of convenience."

Director primacy

Nevada's laws offer flexibility to a
board of directors in managing the affairs of a corporation, and permit management to put in place strong protection from
hostile takeovers. Nevada (unlike other states) permits the corporation's articles of incorporation to vest authority to adopt, amend or repeal bylaws exclusively in the directors, so that shareholders would not be able to change the corporation's bylaws.

Tax benefits

Nevada's tax structure is also a large benefit to incorporation in Nevada. Nevada has no
franchise tax. It also has no
corporate income tax or
personal income tax.[1] While Nevada likes to promote that there are "no corporation taxes" in the state, there is an annual $200 "Business License Fee" which is paid to the Secretary of State's Office at the time of formation or renewal of the corporation. Nevada additionally applies a 1.475% tax rate for most General Business employers, as opposed to Financial Institutions, on wages after deduction of health benefits paid by the employer and certain wages paid to qualified veterans -- that tax is equivalent to a personal income tax. However, the first $50,000 of gross wages is not taxable as a state tax however federal taxes do apply. [2] Nevada also imposes a "Commerce Tax" on businesses with Nevada gross revenue exceeding $4,000,000 within a taxable year.[3]Nevada and
Texas are the only two states that do not have information sharing agreements with the
Internal Revenue Service.[4] In addition there are,

No IRS information-sharing agreement (although other states' incorporation laws often supersede Nevada law in certain cases)

Low annual fees and minimal reporting/disclosure requirements

Stockholders, directors, and officers are not public record, not required to reside or hold meetings in Nevada, and are not required to be
US citizens

Directors not required to hold stock

Officers/directors are protected from personal liability for lawful acts of the corporation

Corporations may purchase, hold, sell, or transfer shares of its own stock

Corporations may issue stock for capital, services, personal property, or real estate, including leases and options

Directors may determine the value of any transactions; their decision is final once determined

Regulatory competition debate

Organizers of a business generally have a choice on where to incorporate the business. In the United States, corporations are generally organized pursuant to state law, rather than federal law. Moreover, a business need not establish or maintain a physical presence in a state in order to incorporate under the state's general corporation law. If the corporation transacts business in a state other than the state of incorporation, it is considered by the other state to be a
foreign corporation. See NRS Chapter 80. For example, a business may be headquartered in
San Jose, California but incorporated in Nevada. The corporation is a Nevada corporation and the State of California will consider it to be a foreign corporation. See California Corporations Code Section 171.

In the United States, states generally, but not invariably, follow the
internal affairs doctrine. "The internal affairs doctrine is a
conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation's internal affairs ... because otherwise a corporation could be faced with conflicting demands."[5] Under the internal affairs doctrine, courts will generally apply the law of the state of incorporation to the "internal affairs" of the corporation.

States can derive revenues through the incorporation of businesses. These revenues include direct payments to the state in the form of filing and other fees. The state can also receive revenues indirectly through businesses (law firms, resident agents, accounts and other service providers) to corporations. The Nevada legislature has tried to make Nevada an attractive alternative to Delaware as a state for incorporation. In many instances, it has tried to "out Delaware" Delaware.

Disputes over the internal affairs of Nevada corporations are usually filed in the
Nevada District Courts, from which judgments can be appealed to the
Supreme Court of Nevada, the
state supreme court. Because of the large number of corporations chartered in Nevada, the courts in that state are more focused on the application of corporate law than the courts of most other states. Nevada's courts are developing a strong body of
case law that serves to give corporations and their counsel guidance on matters of corporate governance, although Delaware and some other states have a larger body of such case law. Nevada's lack of a court dedicated solely to business matters has resulted in calls for the adoption of a
chancery court system, which would have exclusive jurisdiction over all business cases and will assist in growing Nevada's body of business case law.[6]